All Part D Sponsors: Fill & Download for Free

Common error inherent in the term; healthcare isn’t “free”. What you’re asking for is taxpayer-funded, government-administered healthcare, which, ideally, would be rendered with no expectation of direct payment by the patient at or after time of service.Can it be paid for without hindering the economy? Of course it can. All you would do is transition all existing private healthcare plans to an agency of the government; same terms, at least for now, but the government collects all premiums and pays all claims.We have this for our senior citizens, in the form of Medicare. Medicare works much like any other U.S. medical insurance program in that there are premiums and copays payable by the beneficiaries of the plans, and then the plan pays the amount beyond the copay/coinsurance that is billed by the provider.However, it has two fundamental differences. First, anyone with an employment arrangement that the government knows about is paying the bulk of the costs of this plan, in the form of a 2.9% payroll tax, theoretically split half-and-half between your employer and you. So, if you make the US medin income of about $60k a year at 35 years old, you personally are paying $870 for a healthcare plan you legally cannot participate in, and your employer is paying another $870 toward that plan to have you on the payroll, which you will never see even in your gross pay. Unless you’re an independent contractor paid by 1099, basically considered self-employed, in which case you are responsible for both employer and employee portions of the tax ($1740 total). Multiply that by about 265 million working-age adults, and that’s on the order of about $460 billion annually that the seniors actually getting this insurance aren’t paying in premiums, because employers and working-age adults are paying this money but not getting the insurance. That’s something no other insurer on the planet besides the U.S. Government could ever get away with. Imagine having Blue Cross/Blue Shield as your health insurance, and then Cigna or Humana comes and tells your employer “hey, we need 3% of your total employee gross pay to be sent to us to help defray the costs of our own plan for another employer”. You’d tell them to pound sand. But the U.S. government has the power to tax. And it does.Why does the government need so much money to run this program? Because under Federal law, the Department of Health and Human Services which oversees the Medicare program has statute limits on its power to negotiate the “allowable amount” that providers can charge for drugs, devices and equipment. Perhaps you’ve seen the ads on TV, or gotten a robocall, from a company claiming they can get you some medical device like a motor scooter, knee brace or oxygen concentrator at no cost to you if you’re over 65 and eligible for Medicare. These companies aren’t doing it out of the goodness of their hearts; they’re doing this because they can bill Medicare on your behalf at a ridiculous markup over the actual cost of goods sold. These are literally legal insurance scams, legal because the government must pay the quoted price for any covered medical device properly prescribed and procured for a Medicare patient. They can’t choose the lowest bidder, they can’t make you get competing bids, and they definitely can’t examine the provider’s cost structure and insist on cost plus a reasonable markup. They pay the firm’s asking price, because they can do no other. The same applies for prescription drugs under Part D plans; these are privately offered, but pretty much every Medicare patient has a Part D supplemental plan. Yet the government is forbidden to negotiate drug prices on behalf of all Part D subscribers; the insurance companies offering Part D plans must negotiate on behalf of their subset of Medicare patients, a much smaller pool of people that usually have other choices for plans, making the insurer the weak link in negotiations.Much the same happens in the world of private medical insurance, which 85% of U.S. working-age residents have through their employer. Each “group”, generally representing all employees of one company in one state, negotiates with their insurer on premiums and plan features, then insurers negotiate for allowable amounts chargeable by doctors, hospitals and other providers that are “in-network”. Being a network provider has advantages in referrals and compensation for services rendered, the flip side being that providers are limited in the price they can charge for various services.This leads to the basic problem; the provider networks, especially manufacturers, have better negotiating power than any one insurer, because they’re providing healthcare across a very broad geographic area with people covered by dozens of insurers. Insurers, by antitrust law, cannot collude cooperatively to fix prices. So the providers get to set the tone of the negotiations for their products and services, and they do so by demanding ridiculously inflated prices. Unlike in any other debate, the insurer cannot easily just walk away from Merck’s entire product line or from Baylor Scott and White’s hospital system, because its customers have an “inelastic demand” for Merck’s drugs or Baylor’s medical facilities.Simply put, it’s hard to set a price on not dying.As a result, about $500 billion of the U.S.’s annual total healthcare spending is to pay costs for drugs, devices and services in excess of the industrialized world’s average prices for these things, literally “because we can, because you’ll pay it anyway”. That’s about 15% of total U.S. healthcare spending; imagine getting 15% of your current insurance premiums back onto your paycheck. I dunno about you, but that’s grocery money for me and my family. This $500 billion is more than all other reasons we spend more than other countries combined, including higher medical payroll, defensive medicine, billing system inefficiency, “Americans are sicker” etc…… with one exception. End-of-life care. The United States spends nearly 4 times as much per capita keeping the very oldest among us alive, healthy and active as the next biggest spender, Germany:Again, this comes down to “it’s hard to put a price on not dying”, allowing providers of “heroic” end-of-life treatments to charge whatever they like “because we can”. There’s an emotional component to providing care for the elderly; they’re our parents and grandparents, they raised us, they provided for us, got us where we are today. Of course we are going to do whatever we can to provide for their health and comfort in their old age, and to keep them around as long as their bodies keep working (and often after they’re not).This is why the Republican fearmongering of “death panels” under an expansion of government control over healthcare in the U.S. was so effective in limiting the power the government got under ObamaCare; the idea that the choice of how to care for your elderly parents would be taken away from you in the name of cost control scared the bejeezus out of the Baby Boomer generation, whose parents are on the right side of this graph and who are facing the foothills of this uphill climb in spending themselves (and who, not coincidentally, wield considerable power among both parties in Congress). Nobody wants to spend the last years of their lives in a gussied-up hospital complex being cared for by the lowest bidder, especially if the overall goal behind your sacrifice is to get as many others as possible into that facility who otherwise wouldn’t be able to afford it.So, we’ve basically got two problems to solve: providers are the 800-pound gorillas in U.S. healthcare cost negotiations, because they’re providing all of a particular drug or device to the entire market with very few available substitutes, and no one entity in the U.S. has the power to sit on the other side and represent all U.S. healthcare consumers (which is all 325 million of us); and, we love Nana and Pop-Pop too much not to do everything we possibly can to keep them with us as long as possible, long after these treatments are doing more harm than good.Solutions? Well, for the first problem, a single-payer program would give one entity the power to deal face-to-face with providers. This has those providers scared shitless, because the U.S. is pretty much the world’s last cash cow to pad their profit margins. The U.S. is almost literally subsidizing the drug and device prices all the other countries are negotiating; “The Brits want a 20% price reduction on Valium? Sure, fine, give it to them, we’ll just push up the price in the U.S. market to make up the difference on the bottom line”. If the U.S. goes single payer, with the muzzle taken off the government’s price-negotiating ability, that chops down the money tree; the U.S. will be looking at the prices everyone else gets and will demand nothing less.That’s going to hurt drug and device companies, and boy do they ever know it. That’s why the pharmaceutical advocacy lobby, aka “Big Pharma”, spent just shy of a billion dollars on political activity in the 2016 election cycle. $1 billion to protect $500 billion? Sounds like a pretty good business investment. And it’s working; politicians even on the Democrat side are very hesitant to propose or support anything Big Pharma can use to put their picture alongside footage of elderly people with their families and tell the nation “this politician wants your parents to hurry up and die already”.That also hurts other countries; the National Health in the UK will very likely not get the prices it currently does for Valium and fake hips, because all the providers of benzos and artificial joints will be feeling the squeeze in the US and will be looking to bid up the prices everywhere else to stay in the black. So far, we haven’t seen too much concern about that (the ability of the National Health to do business at all post-Brexit is the bigger deal right now), but that may change if and when the details of a single-payer healthcare system empowered to negotiate become widely known.As for getting our country to know when to let their parents go? That’s a far more personal thing, and it’s not something a PSA campaign is going to change hearts and minds about. Quite the contrary, that’s exactly the ammunition Big Pharma needs, a government-sponsored ad campaign encouraging hospice over life-extending treatments. Hope is a really powerful motivator, and it sells a lot of pills and pokes.

Single-payer status has nothing to do with drug development. And drug innovation is not as important as you think.The US spent $325B on prescription drugs in 2015. Medicare spent $147B of this (45%) and Medicaid spent another $57B (18%). That’s 63% of total prescription drug spending in the US. We already have single-payer.What we don’t have are cost controls. CMS (the agency that administers Medicare and Medicaid) is specifically prohibited from negotiating drug prices or restricting the drug formulary. From the law establishing Medicare Part D:the Secretary—(1) may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors; and(2) may not require a particular formulary or institute a price structure for the reimbursement of covered part D drugs.In other words, CMS has to pay for all drugs and may not negotiate on price. We, the taxpayers, have no leverage and just have to pay up. Private insurers can negotiate, but even the largest of them does not have much bargaining power.The argument against cost controls is that it would deprive pharma companies of the very considerable capital needed to develop new drugs. This has to be true at some level. The National Bureau of Economic Research estimates thatcutting prices by 40 to 50 percent in the United States will lead to between 30 and 60 percent fewer R and D projects being undertaken in the early stage of developing a new drug. Relatively modest price changes, such as 5 or 10 percent, are estimated to have relatively little impact on the incentives for product development - perhaps a negative 5 percent.One reaction could be that this conclusion is highly speculative and likely wrong. I have a somewhat different response:We’ve already gotten most of the benefit from pharmaceutical discovery that we are ever going to get. It doesn’t matter if the flood of new drugs slows to a trickle. Few of them will have much impact on health and lifespan. Access is a bigger problem than innovation.We’ve all seen this graph or one like it:Spending a few hundred dollars per capita to provide clean water, vaccines, antibiotics and maternal care has an enormous impact on health and lifespan. Expenditures above $2000 show no clear trend in improving health and life.That’s at the population level, of course, and large benefits to small numbers of people are masked. And this graph looks at all health expenditures, of which pharmaceuticals are usually only a small portion (they account for about 10% of health spending in the US).What’s the evidence that innovative (and pricey) new drugs help us live longer lives? It is surprisingly weak. The Manhattan Institute published a study[1] (sponsored by Aventis, J&J, Novartis, Pfizer and Pharmacia) claiming new drug launches added 0.8 years of life expectancy 1986–2000. The methodology of this study has been slapped down hard[2] . But even if correct, new drugs would account for only a fraction of the roughly 4 years of increased world life expectancy in this period.The picture is a bit clearer when we look at individual drugs and diseases. Statins - hailed as one of the great drug advances of all time - clearly reduce deaths from heart disease. But the overall increase in lifespan? It’s 3–4 days[3] . That’s right. Years of statin therapy will buy you half a week of existence. Yikes.At least statins are cheap. How about all those new and obscenely expensive[4] cancer drugs? Cancer drugs introduced in the EU between 2009–2013 added a median of 2.7 months of survival[5] . Half showed no clear benefit at all. Would we, as a society, really suffer if drug companies had decided not to develop them?If new drugs for heart disease and cancer - the leading killers in developed countries - have so little impact on lifespan, then new drugs for other diseases will have even less impact.I’ve argued (here and here) that we’ve reached Peak Pharma - that the drug company business model is no longer economically viable. What’s less obvious, but no less true, is that we’re not going to miss them when they go.Footnotes[1] https://pdfs.semanticscholar.org/dc6f/2af81cd40e9a48b31c31438029381ddb55ad.pdf[2] Do New Drugs Increase Life Expectancy? A Critique of a Manhattan Institute Paper[3] The effect of statins on average survival in randomised trials, an analysis of end point postponement[4] High Cancer Drug Prices in the United States: Reasons and Proposed Solutions[5] Availability of evidence of benefits on overall survival and quality of life of cancer drugs approved by European Medicines Agency: retrospective cohort study of drug approvals 2009-13

What most people do not understand is that Medicare pays for very little.Medicare Part A is free. See What Part A covers Coverage is subject to deductibles and co-pays.Medicare Part B requires the participant to pay a premium. See What Part B covers Coverage is subject to deductibles and co-pays.Medicare Part D requires the participant to pay a premium. See Drug coverage (Part D) Coverage for most is subject to deductibles. Also, many drugs covered by private insurance are not covered under Medicare Part D.Medicare does not pay for dental care or vision care.Medicare pays lower reimbursement rates to providers than most private insurers do. Many providers will not accept Medicare assignment. Thus th choice of physicians and other providers is limited.In order to obtain the services generally provided by employer sponsored healthcare insurance, Medicare premiums would increase.